What would you pay, sight unseen, for a house that nobody wants, on a hard-luck street where no houses are selling?<\/p>\n
That question is easy compared to the one confronting the Treasury Department as Washington works toward a vast bailout of financial institutions. Treasury Secretary Henry M. Paulson Jr. is proposing to spend up to $700 billion to buy troubled investments that even Wall Street is struggling to put a price on.<\/p>\n
A big concern in Washington \u201d\u201d and among many ordinary Americans \u201d\u201d is that the difficulty in valuing these assets could result in the government\u2019s buying them for more than they will ever be worth, a step that would benefit financial institutions at taxpayers\u2019 expense.<\/p>\n
Anyone who has tried to buy or sell a house when the market is falling, as it is now, knows how difficult it can be to agree on a price. But valuing the securities that the Treasury aims to buy will be far more difficult. Each one of these investments is tied to thousands of individual mortgages, and many of those loans are going bad as the housing market worsens.<\/p>\n